[Special Feature 3] Governor Ueda’s BOJ: “Accelerating rate hikes” trigger economic panic

The story

At a press conference following the G20 Finance Ministers and Central Bank Governors Meeting, Governor Ueda Kazuo (植田和男) made clear his stance of proceeding with Bank of Japan rate hikes. With inflation continuing to exceed the 2% price stability target, he indicated that the Bank is eager to eliminate real negative interest rates.

Domestic prices have continued to rise, including import costs for energy and food, and the CPI is expected to exceed 3% going forward. This has led to growing expectations that companies will pass higher costs through to final prices.

U.S. interest-rate trends are also putting pressure on the Bank of Japan. Since the Federal Reserve raised rates in September, the interest-rate differential between Japan and the United States has not narrowed, and there are expectations that pressure on the yen will intensify.

Some within the Bank of Japan are also calling for an acceleration in rate hikes, citing the Taylor rule and an appropriate interest rate of 3%. Further coverage is expected in the December issue of ZAITEN.

At a glance

Policy rateThe current policy rate is 1.25%, and the economy remains in a state of real negative interest rates. There are indications that the rate should be raised further.

CPIThrough August, the consumer price index remained above 2% for 23 consecutive months.

US market trendsThe U.S. Federal Reserve raised interest rates in September for the first time in 3 years and 2 months, putting pressure on the Bank of Japan.

Appropriate interest rateSome at the Bank of Japan are calling for an appropriate interest rate of 3% based on the Taylor rule.

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